NEW YORK--(BUSINESS WIRE)--As of Nov. 20, 2014, provisional winning bids in the U.S. Federal Communications Commission's auction of advanced wireless services (AWS-3) spectrum reached $25.8 billion (20th round), soaring past the high end of Fitch's estimates of $18 billion for the auction as well as many optimistic estimates. Bidding has not slowed materially as the aggregate bids in the most recent round were up more than 6% from the previous round.

Fitch continues to believe Verizon Wireless, AT&T Mobility, and T-Mobile have material financial flexibility within their credit profiles to acquire spectrum in the upcoming AWS-3 and TV broadcast auctions. Both Verizon Wireless and AT&T Mobility could spend $12 billion-$16 billion before pressuring the ratings. T-Mobile raised $3 billion of debt in anticipation of the auction. Fitch expects DISH, which has substantial flexibility, may acquire less spectrum if valuations are high and may have more interest in the lower value, uplink spectrum.

The AWS-3 auction format does not reveal the identity of individual bidders by license, so the credit impact on any individual operator cannot be gauged. Unsurprisingly, the densest markets have garnered the highest bids per MHz-Pop, with the 20 MHz J-block in the largest markets the most attractive as anticipated. Given the current financial flexibility of the current participants, the effect of the AWS-3 auction may be manageable from a credit perspective, depending on the carrier. If the TV broadcast auction takes place in 2016, the incremental effect of participation in the TV broadcast auction may pressure credit profiles, depending on operator strategies at that time as well as financial performance over the next few years. However, further delays would give carriers the chance to digest the impact of the current auction on their credit profiles.

The elevated values for spectrum highlight carriers desire to acquire spectrum to support rapidly growing data consumption. The bidding may also highlight concerns regarding the auction of TV broadcast spectrum, which was delayed until 2016 due to auction design complexities and the legal challenges to the auction posed by the National Association of Broadcasters. In Fitch's view, carriers may be concerned about further delays in the auction, the outcome of the legal challenge, and the ultimate level of spectrum available in the auction. While the TV broadcast spectrum has different characteristics than the AWS-3 spectrum, further delays in the TV broadcast auction will push out the opportunity for carriers to add spectrum capacity.

For additional information, please see our Nov. 5, 2014 special report titled, "Spectrum Inspection: AWS-3 Auction Review (LTE Deployment Strategy Examined)" available at www.fitchratings.com.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Spectrum Inspection: AWS-3 Auction Review (LTE Deployment Strategy Examined)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=800669

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